Arthur F. Turner and Stephanie A. Turner

UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
____________________________________
IN RE:
ARTHUR F. TURNER AND 	Chapter 13
STEPHANIE A. TURNER, 	Case No. 09-18816-WCH
DEBTORS
____________________________________
MEMORANDUM OF DECISION
I. INTRODUCTION
The matter before the Court is the Trustee’s Objection to Confirmation of Debtors’ Amended
Chapter 13 Plan (the “Objection”) filed by the Chapter 13 trustee (the “Trustee”) and the Response
to Trustee’s Objection to Confirmation of Debtors’ Amended Plan (the “Response”) filed by Arthur
F. Turner and Stephanie A. Turner (collectively, the “Debtors”). Through the Objection, the Trustee
asserts that the Debtors’ proposed Chapter 13 plan (the “Second Amended Plan”) does not meet the
best efforts test of 11 U.S.C. § 1325(b)(1)(B) because a portion of the Debtors’ monthly income is
devoted to the maintenance of a vacation property. For the reasons set forth below, I will enter an
order sustaining the Objection.
II. BACKGROUND
The Debtors filed their Chapter 13 petition on September 16, 2009. On October 13, 2009,
the Debtors filed their schedules as well as the Chapter 13 Statement of Current Monthly Income and
Calculation of Commitment Period and Disposable Income (“Form 22C”). On line 20 of Form 22C,
the Debtors indicated current monthly income of $8,061.50, which annualized on line 21 equals
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$96,738. Because this amount is less than the applicable median family income for a family of four
in this state, namely, $100,280, the Debtors are below median income debtors with an applicable
commitment period of three years pursuant to 11 U.S.C. § 1325(b)(4). As below median income
debtors, the Debtors were not required to determine their 	monthly disposable income under 11
U.S.C. § 1325(b)(2) on Form 22C.
On Schedule A - Real Property (“Schedule A”), the Debtors disclosed an ownership interest
in their principal residence located in Attleboro, Massachusetts and a sixteen-by-twenty foot hunting
cabin with a half bath located in Wellington, Maine (the “Vacation Property”) worth $48,000.
According to Schedule A and Schedule D - Creditors Holding Secured Claims (“Schedule D”), the
Vacation Property is subject to first and second mortgages in favor of Camden National Bank with
the remaining balances on the notes totaling $31,800. On Schedule C - Property Claimed as Exempt
(“Schedule C”), the Debtors claimed an exemption in the Vacation Property in the amount of
$16,200 pursuant to 11 U.S.C. § 522(d)(5).
On March 5, 2010, the Debtors filed an Amended Schedule I - Current Income of Individual
Debtor(s) (“Amended Schedule I”), Amended Schedule J - Current Expenditures of Individual
Debtor(s) (“Amended Schedule J”), and the Second Amended Plan to account for a reduction in their
combined average monthly income resulting from Stephanie Turner having been laid off from her
full-time position. Amended Schedule I reflects that the Debtors’ combined average monthly income
is $5,862.58. On Amended Schedule J, they listed average monthly expenses totaling $5,624.75.
Among the expenses detailed are payments on account of first and second mortgages on the Vacation
Property in the amounts of $295 and $135 per month, respectively. These payments form the basis
of the Objection.
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Through the Second Amended Plan, the Debtors propose to pay to the Trustee $237 per
month for a term of sixty-months. 	It contemplates that they will continue to make the mortgage1
payments on both their principal residence and the Vacation Property outside of the plan. Thus, after
payment of secured claims totaling $12,263.18, an administrative claim in the amount of $500, and
the Trustee’s commission of $2,401.20, the unsecured creditors, whose claims total $52,622.10,
would receive no dividend.2
On April 5, 2010, the Trustee filed the Objection, challenging the reasonableness and
necessity of the $430 monthly mortgage payments to maintain the Vacation Property. The Debtors
filed the Response on April 12, 2010, arguing that the Second Amended Plan was filed in good faith
and that their living expenses are well below the national standard for a family of four. On May 27,
2010, I held a hearing on the Objection and at the conclusion of oral arguments, took the matter
under advisement.
III. POSITIONS OF THE PARTIES
The Trustee
Put simply, the Trustee asserts that the Second Amended Plan does not meet the best interest
test of 11 U.S.C. § 1325(b)(1)(B) because the Debtors are devoting $430 per month to maintain
mortgage payments on the Vacation Property that could otherwise be paid to their unsecured
creditors. 	She contends that these payments are neither reasonable nor necessary expenses,
Although the Debtors are below median income debtors, they have indicated that a1
sixty-month term is necessary to avoid financial hardship.
I note that the Debtors’ prior First Amended Chapter 13 Plan, which was filed before2
Stephanie Turner lost her employment, provided for a 19.94% dividend to their unsecured
creditors.
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particularly in light of the proposed 0% dividend. Even if only paid over a term of thirty-six months,
argues the Trustee, these monthly mortgage payments would total $15,480 that should be devoted
to the plan.3
The Debtors
Without squarely addressing the issue raised by the Trustee, the Debtors argue that Amended
Schedules I and J accurately reflect their “excess income” and inability to pay unsecured creditors.
Further, they assert that their food and clothing expenses provided on Schedule J are well below the
national standards for a family of four. 	In any event, the Debtors emphasize that the Vacation
Property, which was claimed as exempt, is only a sixteen-by-twenty foot hunting cabin with a half
bath, no phone lines, and no electricity. Accordingly, they contend that they have proposed the
Second Amended Plan in good faith and ask to continue under it until such time as Stephanie Turner
secures full-time employment.
IV. DISCUSSION
Section 1325(b)(1)(B) of the Bankruptcy Code provides in relevant part:
(b)(1) If the trustee or the holder of an allowed unsecured claim objects to the
confirmation of the plan, then the court may not approve the plan unless, as of the
effective date of the plan--
* * *
(B) the plan provides that all of the debtor’s projected disposable
income to be received in the applicable commitment period beginning
on the date that the first payment is due under the plan will be applied
To put the net effect of this in perspective, the proposed plan payment would increase to3
$667 per month, yielding a total plan cost of $24,012 over the applicable commitment period of
thirty-six months. After payment of the secured and administrative claims, including the
Trustee’s commission, $8,847.62 would be available to the general unsecured creditors. Based
upon the amount of those claims, the dividend would therefore increase from 0% to 16.8%.
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to make payments to unsecured creditors under the plan. 4
This section is also known as the “best efforts test” because it requires Chapter 13 debtors to devote
all of their disposable income to the repayment of their unsecured creditors during the term of the
plan. 	The phrase “projected disposable income” was left undefined, but the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005 (“BAPCPA”) defined “disposable income” as5
“‘current monthly income received by the debtor’ less ‘amounts reasonably necessary to be
expended’ for the debtor’s maintenance and support, for qualifying charitable contributions, and for
business expenditures.” 	Therefore, to calculate “disposable income,” and in turn “projected6
disposable income,” one must first determine the “current monthly income received by the debtor”
and “amounts reasonably necessary to be expended.”
Generally, “current monthly income” is the average monthly income the debtor received
during the six months preceding the filing of the debtor’s petition. 	In this way, “[current monthly7
income] is not current, not really monthly, or necessarily income.” 	Because this historical average8
is not necessarily reflective of circumstances as they exist at confirmation, the Supreme Court of the
United States recently held that “projected disposable income” was a “forward-looking” concept that
11 U.S.C. § 1325(b)(1)(B).4
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. No. 109-8,5
119 Stat. 23, 11 U.S.C. § 101, et seq.
Hamilton v. Lanning, — S.Ct. —, 2010 WL 2243704 *4 (U.S. June 7, 2010) (quoting6
11 U.S.C. § 1325(b)(2)(A)(i) and (ii)).
See 11 U.S.C. 101(10A)(i).7
In re Kolb, 366 B.R. 102, 810 n.12 (Bankr. S.D. Ohio 2007) (calculating “projected8
disposable income” with a mechanical approach, rather than a forward-looking approach recently
adopted by the Supreme Court).
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allowed “bankruptcy courts [to] account for changes in the debtor’s income or expenses that are
known or virtually certain at the time of confirmation.”9
In the present case, the Debtors determined the income component of their “disposable
income” with reference to Amended Schedule I, representing their actual income in light of
Stephanie Turner’s post-petition loss of employment. Because the Trustee did not object to the
income portion of the “disposable income” calculation, I will construe her silence as agreement to
the figure reported in Amended Schedule I.
Turning to the expense component of the “disposable income” calculation, for below median
income debtors, “amounts reasonably necessary to be expended” includes the full amount needed
“for the maintenance or support of the debtor or a dependent of the debtor,” as well as certain
qualifying charitable contributions, and business expenses. 	In contrast, BAPCPA requires above10
median income debtors to determine their expenses with reference to paragraphs (A) and (B) of 11
U.S.C. § 707(b)(2), otherwise known as the means test. 	Because 11 U.S.C. § 1325(b) expressly11
limits the expense portion of the means test to above median income debtors and otherwise uses the
same phrase to describe permissible maintenance and support that existed prior to BAPCPA, many
courts have concluded that BAPCPA did not change the standard as applied to below median income
debtors.12
Hamilton v. Lanning, 2010 WL 2243704 *12.9
11 U.S.C. § 1325(b)(2)(A), (B).10
11 U.S.C. § 1325(b)(3); see also 11 U.S.C. § 707(b)(2)(A), (B).11
See, e.g., In re Short, No. 08-11224, 2008 WL 5751873 *3 (Bankr. N.D. Ohio Sept. 11,12
2008); In re Rush, 387 B.R. 26, 30 (Bankr. W.D. Mo. 2008); In re Mullen, 369 B.R. 25, 31
(Bankr. D. Or. 2007); In re Kolb, 366 B.R. at 11, abrogated in part by Hamilton v. Lanning,
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Prior to BAPCPA, “reasonably necessary” expenses were evaluated on a case by case basis.
Rather than establishing strict guidelines, courts instead sought to “strike a balance between debtors
being required ‘to adopt a totally spartan existence’ and allowing them to ‘continue an extravagant
lifestyle at the expense of creditors.’” 	Generally, courts construed “reasonably necessary” as a13
standard of adequacy, supporting basic needs, and not related to the lifestyle to which one was
accustomed. 	Accordingly, many courts routinely disallowed expenses for private school tuition,14 	15
luxury vehicles, 	recreational boat expenses, 	country club memberships, 	and vacation16 	17 	18
2010 WL 2243704 *4; In re Miller, 361 B.R. 224, 228 (Bankr. N.D. Ala. 2007); In re Girodes,
350 B.R. 31, 37 (Bankr. M.D.N.C. 2006); In re Fuller, 346 B.R. 472, 483 (Bankr. S.D. Ill. 2006);
In re Renicker, 342 B.R. 304, 308 (Bankr. W.D. Mo. 2006); see also In re McGillis, 370 B.R.
720, 729 (Bankr. W.D. Mich. 2007); In re Charles, 375 B.R. 338, 340 n.2 (Bankr. E.D. Tex.
2007).
In re Guild, 269 B.R. 470, 472 (Bankr. D. Mass. 2001) (quoting In re Beckel, 268 B.R.13
179, 183 (Bankr. N.D. Iowa 2001)).
In re McNichols, 249 B.R. 160, 169 (Bankr. N.D. Ill. 2000); In re Cardillo, 170 B.R.14
490, 491 (Bankr. D.N.H. 1994) (citing In re Sutliff, 79 B.R. 151, 157 (Bankr. N.D.N.Y. 1987)).
Watson v. Boyajian (In re Watson), 403 F.3d 1, 8 (1st Cir. 2005); Lynch v. Tate (In re15
Lynch), 299 B.R. 776 (W.D.N.C. 2003); In re Ehret, 238 B.R. 85 (Bankr. D.N.J. 1999); In re
Zaleski, 216 B.R. 425 (Bankr. D.N.D. 1997).
In re Zaleski, 216 B.R. at 432 (Chevy Blazer); In re Gibson, 142 B.R. 879 (Bankr. E.D.16
Mo. 1992) (Cadillac and Corvette); In re Reyes, 106 B.R. 155 (Bankr. N.D. Ill. 1989) (Chevy
Blazer); In re Rogers, 65 B.R. 1018 (Bankr. E.D. Mich. 1986) (Corvette). See also In re Lindsey,
243 B.R. 30 (Bankr. E.D. Tenn. 1999) (tractor and baler); In re Brooks, 241 B.R. 184 (Bankr.
S.D. Ohio 1999) (recreational vehicle); In re Rybicki, 138 B.R. 225 (Bankr. S.D. Ill. 1992)
(camper).
In re Kasun, 186 B.R. 62 (Bankr. E.D. Va. 1995) (boat, boat slip rental, and boat17
insurance); In re Hedges, 68 B.R. 18, 20 (Bankr. E.D. Va. 1986) (Chaparral boat).
In re Chrzanowski, 70 B.R. 447 (Bankr. D. Del. 1987); In re Kitson, 65 B.R. 615, 622,18
(Bankr. E.D.N.C. 1986).
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homes 	on the basis that luxury expenses detract from possible payments to unsecured creditors.19
In In re Dick, for example, I previously held that “maintaining a non-income producing vacation
home goes far beyond maintaining the debtor’s basic needs.”20
It is the debtor’s burden to prove that an expense is reasonably necessary. 	In the present21
case, the Debtors have not carried that burden. Particularly in light of my prior decision in In re
Dick, they have offered no explanation why the monthly mortgage payments for the Vacation
Property are “reasonably necessary.” It is irrelevant that some of the Debtors’ living expenses are
substantially below the amount permissible under the “national standards” because Congress
deliberately excluded below median income debtors from determining their expenses with respect
to 11 U.S.C. § 707(b)(2). Below median income debtors are simply subject to a different standard.
Moreover, individual expenses must be scrutinized and the Vacation Property is no less a luxury
merely because it is not opulent. Nor is it significant that it is exempt because the funds used to pay
the mortgages are not. 	Consequently, even had Stephanie Turner not lost her employment, or
alternatively, if she had obtained new employment, this expense would remain objectionable unless
the Debtors could otherwise propose a plan that paid unsecured creditors a 100% dividend.
In re McKown, 227 B.R. 287 (Bankr. N.D. Ohio 1998); In re Dick, 222 B.R. 18919
(Bankr. D. Mass. 1998); In re Cardillo, 170 B.R. at 491.
In re Dick, 222 B.R. at 191.20
In re Watson, 403 F.3d at 8; see In re Phillips, 382 B.R. 153, 171 (Bankr. D. Mass.21
2008).
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V. CONCLUSION
In light of the foregoing, I will enter an order sustaining the Objection.
______________________________
William C. Hillman
United States Bankruptcy Judge
Dated: June 17, 2010
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